2024 Market Predictions

Hello all,

They say when making predictions for the year, one should try to make those before March, so the predictions actually predate action.  Otherwise, they simply become self-fulfilling prophecies. Well, thanks to this being a leap year, today is the last day to proceed with the time-honored neck stretching exercise of predicting where the market is going to be at the end of 2024.

I will also cover some of the latest events taking place in Europe where a huge battle between IP behemoths has been brewing for a year and finally came to a crucial vote on Wednesday of this week, as well as several other recent stories.

As usual, as I focus on the macro picture in this newsletter, I want to remind everyone that we track everything that is going on in this world and for those who need their regular dose of news, once again you can follow me on either LinkedIn or Twitter where I post almost daily about some of the most newsworthy events. 

On behalf of the whole Tangible IP team, we wish you a happy 2024!

 Louis

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Tangible IP News

I am pleased to report that Erika Warner who has been with us for over 7 years already has recently been promoted to Senior V.P. Brokerage at Tangible IP, a reflection of the senior role she now plays with us. Many of you know Erika and she has been instrumental for years now in connecting buyers and sellers in our space and making sure transactions go through. I couldn’t be happier to highlight her many contributions to the firm in the past, present and future.

We have recently closed a voluntary license to a patent portfolio in the semiconductor space and we will be making a formal announcement shortly.

We also have several other portfolios for sale that offer great opportunities to savvy buyers. All of our patents for sale are listed here. Similarly, if you’d like to be added on our distribution list in the future so that you are the first to receive new opportunities, please email us at info@tangibleip.biz.

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Patents Wanted

Call for high quality portfolios!

We are always open to reviewing high quality portfolios. Some of the areas of most interest to our buying network right now include:

• Video compression SEPs and/or video streaming, live streaming, targeted ads, machine learning
• Point of Sale Technology

• Medical Device technology – particularly wearables and IOT health monitoring

• Patents applicable to RFID tags, RFID Antennas, RFID readers and Near Field Communication (NFC) devices.
• SEPs (Declared or not) relevant to any of the following: 3GPP, 802.11, LTE, 5G
• Imaging technology including both medical and nonmedical applications such as OCR, image manipulation
• Semiconductor as related to memory-FLASH, DRAM as well as process/manufacturing and circuit technologies

You can review our criteria here but if you own a patent portfolio with at least five issued US patents and have knowledge of others using your technology (infringement), we are happy to review for potential brokerage. We will also look at larger portfolios where evidence of use is uncertain.

Please reach out to info@tangibleip.biz with any assets that may match these requests.

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Recent News:

Do Standard Essential Patents (SEPs) Have a Future?

SEPs are patents on technology deemed crucial for a technical standard, like 5G or Wi-Fi. This means any product adhering to the standard must use patented technology. Historically, courts in various countries decided what royalty rates should apply between SEP owner and licensee hold outs whenever the parties could not agree on a rate through conventional negotiations. As an example, see here for a recent case involving Ericsson and Lenovo.

This all changed in April 2023 when the European Commission (after intense lobbying from technology implementers) proposed a regulation to establish a brand new system for managing SEPs which included the following elements:

• Registration: SEP holders would register their patents with the EU Intellectual Property Office (EUIPO).
• Essentiality Checks: EUIPO would verify if the patents truly are essential to the standard.
• FRAND Licensing: The proposal emphasized “Fair, Reasonable, and Non-Discriminatory” licensing for SEPs.

Those behind the proposed regulation (think Apple, Google, Intel, etc.) claimed it would increase transparency and fairness in SEP licensing, as SEP holders might not disclose all their SEPs otherwise, hindering fair negotiation. They also took offense to perceived high licensing fees that they alleged could impede innovation and competition.

On the flip side of the coin, SEP owners (think Nokia, Ericsson, Broadcom, Sisvel, etc.) and the larger IP community were very critical of the proposal. They argued that the current model had worked well to date and, importantly, it appeared that the decision maker would shift from experts (the courts) to civil servants who lacked the proper expertise. They maintained that the proposal would discourage innovation, create uncertainty around licensing terms and could disincentivize R&D investment. They also alleged that it could stifle competition by setting fixed rates that could disadvantage smaller players lacking economies of scale.

On Wednesday this week, after almost a year of controversy and heated debate, the European Parliament voted in favor of a new regulation for SEPs, with a decisive vote of 454 in favor and only 83 against. The EU Council must now approve this regulation.

The proposal was initially put forth by the European Commission and had already passed the Committee on Legal Affairs, albeit with minor changes influenced by industry and interest groups.

The proposed legislation aims to address concerns related to transparency, over-declaration, and lengthy court proceedings associated with SEPs. The EU Intellectual Property Office (EUIPO) will gain new powers to create a competency center, including a register of SEP holders and an SEP Licensing Assistance Hub.

Key Points of the final regulation:

• Transparency: The regulation seeks to enhance transparency in SEPs.
• Reduced Over-Declaration: Measures will be implemented to prevent excessive claims of essentiality.
• Competence Center: The European Union Intellectual Property Office (EUIPO) will establish a competence center specifically for SEPs.
• FRAND Determination: Mediators will determine FRAND (Fair, Reasonable, and Non-Discriminatory) terms before litigation in Unified Patent Court (UPC) countries.
• Restrictions on Enforcement: SEP owners cannot enforce their patents against implementers during EUIPO examination.

Needless to say, and you may have already reached the same conclusion reading the list above, this is a massive blow to SEP patent owners and, by extension, to all patent owners. There is no other way around it honestly. The fate of SEP is now in the hands of a group of bureaucrats who have no prior expertise in this space and no mechanism (unlike a court) to force both sides to produce all relevant information with a threat of contempt indictments if they do not comply. Seems to me that implementers, after losing the battle of the UPC, won this next chapter handily. Lobbying works a lot better with politicians than it does with judges…

It will now be rather interesting to monitor how this plays out in the next couple of years. For more, see my predictions below.

Are We Seeing the Demise of IPwe?

Erich Spangenberg has been one of the most successful and innovative guys I know when it comes to finding ways to monetize patents before others could, and he did this over and over. He made a bundle with IP Navigation last decade when you could still assert patent in the US with a reasonable chance of winning. When the PTAB was introduced, he had the brilliant idea to file IPRs against pharma patents covering blockbuster medications and shorted their publicly traded stock. He bought the stock on the downswing created by this unknown challenge to those core patents again with great success. So, when he created IPwe with co-founder Brian Berman, I thought this was probably the next big thing, even if I never fully understood what the new venture was doing.

According to IPwe’s website, IPwe has been at the forefront of developing blockchain solutions for IP strategy and collaborated with leading blockchain providers such as IBM, Hyperledger, and CasperLabs  since its inception in 2018. I personally never really grasped why one would want to create a parallel recordation system for patent ownership since patent offices around the world already provided this service for free. But what do I know? Erich is a lot smarter than most of us and he guided the company through several rounds of expansion, cutting strategic partnerships such as Clarivate and others along the way.

Therefore, I was rather surprised last week to read the announcement that IPwe had filed for bankruptcy under Chapter 11. While the company intends to stay afloat and this may be a nice way to wash out some of its debt, it is still rather ominous that it could not cover its costs after 5 years in operation. You can’t win all the time. Heck: even Warren Buffet bought a few stocks along the way that did not fare too well but he is doing just fine overall…

IPRs Are Down: What Does It Mean?

I discussed a couple of months ago how successful IPR challengers have been in front of the PTAB, with roughly 70%  (some say the real number is closer to 85%) of claims invalidated under Director Vidal’s tenure. Despite this track record, recent IPRs filings appear to be going down. See graph below from RPX:

According to the defensive aggregator, the main reason behind this sudden decline would be the uncertainty of future PTAB rules should a proposed bill called PREVAIL (which I also addressed in detail before) become law. In 2023, amidst a persistent debate over the reform of the Patent Trial and Appeal Board (PTAB), the PREVAIL Act was introduced, proposing significant changes including a standing requirement, expanded IPR estoppel, and restrictions on multiple petitions against the same patent. The bill also suggests aligning evidentiary and claim construction standards with district courts and preventing USPTO director influence on PTAB decisions. Despite a Senate hearing on the PREVAIL Act in November, witnesses provided conflicting perspectives, reflecting the lack of consensus that has hindered similar bills previously.

I personally having difficulties buying this argument, since most everyone knows (and certainly well plugged large tech companies) that there is almost no chance that politicians will expand any political capital on something so trivial (in their eyes) as PTAB reform during an election year, especially with a House so divided. My reading of it is that the recent decline of IPRs rather tracks very closely with the corresponding number of new patent cases filed in court, as most defendants will systematically file one or several IPRs within months after being sued and RPX’s data (see our December column) seems to support this parallel. See below:

I said I would share these if space allowed for it. Well, it doesn’t. If you made it all the way to reading this, congratulations. But you are probably saturated by now and I will keep those for the next column due in a few weeks. Stay tuned. In the meantime, you can follow my musings on LinkedIn.

In the meantime, PTAB Administrative judges continue to invalidate issued patents by the truck load, despite having in many cases very little relevant expertise in the domain they adjudicate upon, if you are to believe a recent report from the folks at US Inventors

The UPC Still Going Strong

It has been fun to watch the young story of the Unitary Patent Court (UPC) since it went live last June. It is something to behold when a tribunal has no docket backlog! Man, things move fast. They hear cases fast, adjudicate even quicker and even issue … injunctions (as they do in Germany). US patent owners are just salivating at the thought of having this remedy back in the US. Don’t dare to dream though…

Here is a really good summary of what and  how the UPC has done so far. The French firm August-Debousy has also launched a website that tracks all UPC decisions and it’s free.

And Now For 2024…

Before I venture new predictions for the year, let me remind our readers of the 5 factors that I have been tracking over the years which in my opinion impact the IP marketplace one way or another.

These main factors are:

1. Noticeable changes in the supply & demand;
2. New case law that may have a long-lasting impacts;
3. Changes in the regulatory environment;
4. Recent large damage awards against infringers;
5. Broad availability of funding to support assertion activities.

Louis’s Predictions

1. Increased supply of patents will continue to depress the market and impact patent valuations downwards. We have empirical evidence for this, as several Fortune 500 companies (some existing clients, some wannabees 😉) have contacted us lately to see if we can assist them with divesting some portions of their patent war chest. The problem with those large portfolios is often they are not only heavily encumbered but quantity does not always equate to quality when it comes to individual assets that one can actually monetize. So, it’s like having a garage sale where everyone’s selling the same rusty lawnmower—sure, there’s plenty to choose from, but no one’s really mowing any lawns with them!

2. Although there is always new caselaw impacting the odds of patent owners on the fringes, there is currently no case that we are aware of where the US Supreme Court could suddenly move the goal posts like it did with Alice, dropping a bomb and leaving the lower courts to pick up the mess. Which instead of cleaning/clarifying the mess, the lower courts just took that bad decision and made it worse over the years. So, in short, I do not predict any significant judicial decision in 2024 that will move the pendulum to either side. Unless, of course, Justice Roberts and his colleagues decide to moonlight as patent attorneys and sprinkle some more legal chaos for fun!

3. I’d like to say that Congress will finally pass one or both of two bills that have been catching some traction for over a year now (PREVAIL and PERA). If you read this far, you already know it ain’t going to happen, especially in an election year where former president Trump is directing the House from the side lines and making sure he doesn’t give President Biden anything to brag about comes November. Now that Big Tech feels embolden again after what just happened in Europe, I would not be surprised at all if we actually witnessed some renewed movement with some older bills filled years ago (such as the STRONG Patents Act) that actually tried to raise the bar even higher before patent owners can assert their patents. Ah, politics, where the only thing more patented than ideas is gridlock!

4. When it comes to damages awards, 2023 was not a good year and I predict that 2024 will be more of the same, with most verdict awards of any significance being overturned or substantially reduced. Just recently, Samsung dodged a $4B verdict in Texas (the jury could not agree that it infringed the patents). A few months ago, the US Appeals court threw out a $2B verdict against Intel. Just before that, Lilly won a reversal on appeal against Engality after initially being slammed with a $200M verdict award. And so on and so forth. It appears to a lot of industry pundits that the Appeals Court has some kind of philosophical ceiling in mind beyond which no one should be entitled to profit from their patents. Please keep that in mind when retaining damages experts, sometimes, less is more. And we predict that in view of this recent track record, the verdict insurance products from the likes of AON and a few others will become more elusive and a lot more expensive to acquire. It’s like playing a high-stakes game of legal Jenga—just when you think you’ve built up your case, the appeals court comes in and pulls out the crucial block!

5. Finally, while we are repeatedly being told by NPEs and litigation funders alike that they “have a lot of capital to deploy”, the truth is it is being spent at a glacial pace given how hard it is to find an opportunity that the ones holding the checkbook actually like. And since there are so many other areas where these funds could redeploy which have none of the uncertainties of patent assertion, I predict that some of these funds will soon be redeployed outside of the patent space.

If these predictions haven’t left you reeling, you haven’t been paying attention… On the bright side, I see a few positives for those holding European patents who can ride the UPC wave while it lasts. Not so much however for large SEP owners who will see a sharp decline in 2024 and beyond in their licensing revenues after a very solid 2023.

I’ll come back early next year to see how well my crystal ball did. In the meantime, to a great 2024!